Question 1

A Just-In-Time (JIT)  inventory management program has all but which of the following requirements?

Accepted Answer

A)   quality production
B)   large safety stocks
C)   close ties between suppliers, manufacturers, and customers
D)   minimizing inventory levelsE) B) and D)
F) B) and C)

Question 2

Cash management becomes more important as the level of short-term interest rates rise.

Accepted Answer

A) True 
 B)False

Question 3

SWIFT's implementation of the 'smart card' is expected to

Accepted Answer

A)   decrease the likelihood of electronic fraud.
B)   remove the need for secret information to be sent through mail.
C)   guarantee the identity of the sender.
D)   all of the other answers are correctE) B) and C)
F) A) and D)

Question 4

The Milling Corp. has developed a new type of widget. The local distributor expects to increase his sales by 20% over the past year due to this new development. Last year's sales were $50,000 at a selling price of $100 per unit. The manager would like to cut costs as much as possible and comes to you for advice.
Relevant cost information includes: $$\begin{array} { l l } 
\text { Warehouse space } & \$ 2.50 \text { unit } \
\text { Material handling expense } & \$ 1.50 / \text { unit } \
\text { Insurance premium } & \$ 1.00 / \text { unit } \
\text { Total ordering cost } & \$ 100.00 \text { per order }
\end{array}$$ A) What is the economic order quantity?
B) What is the amount of average inventory?
C) How many orders will be made per year?
D) What is the total cost of this inventory decision?

Accepted Answer

A) $$E O Q = \sqrt { \frac { 2 S O } { C } } = \sqrt { \frac { 2 \times 600 \times \$ 100 } { \$ 5.00 } } = 154.92 \approx 155$$ 
B) 155/2=77.5 units
C) $$\text { Orders per year } = \frac { S } { E O Q } = \frac { 600 } { 155 } = 3.87$$ 
D) $$\begin{array} { l } 
T C = \frac { S O } { Q } + \frac { C Q } { 2 } \
T C = 3.87 \times \$ 100 + \frac { 155 } { 2 } \times \$ 5 \
T C = \$ 387.50 + \$ 387.10 \
T C = \$ 774.60
\end{array}$$

Question 5

Deposit receipts purchased in small denominations of $1,000 at the bank are readily marketable.

Accepted Answer

A) True 
 B)False

Question 6

Cash balances are usually determined by the amount of cash flowing through the firm on a yearly basis.

Accepted Answer

A) True 
 B)False

Question 7

Because of changing economic conditions, it is difficult for companies such as D&B to devise models predicting payment problems and probability of bankruptcy 12 months in the future.

Accepted Answer

A) True 
 B)False

Question 8

In managing cash and marketable securities, what should be the manager's primary concern?

Accepted Answer

A)   maximization of profit
B)   maximization of liquid assets
C)   acceptable return on investment
D)   liquidity and safetyE) B) and C)
F) A) and B)

Question 9

Treasury bills are unique in that they trade on a premium basis.

Accepted Answer

A) True 
 B)False

Question 10

Inventories are usually the most liquid, but lowest-yielding, current asset of a firm.

Accepted Answer

A) True 
 B)False

Question 11

Driveline Sprockets expects total sales of $20,000. The price per unit is $5. The firm estimates an ordering cost of $9.00 per order, with an inventory cost of $1.20 per unit. What is the optimum order size?

Accepted Answer

A)   173 units
B)   1,852 units
C)   245 units
D)   2,000 unitsE) All of the above
F) A) and B) C

Question 12

Minimizing cash balances can improve overall corporate profitability.

Accepted Answer

A) True 
 B)False

Question 13

The 4 C's of credit include character, capital, capacity, and conditions.

Accepted Answer

A) True 
 B)False

Question 14

For modern corporations, the more cash they have, the better off they are.

Accepted Answer

A) True 
 B)False

Question 15

A multinational company may prefer to hold sizeable cash balances in one currency rather than another because

Accepted Answer

A)   of high interest rates existing in one country.
B)   one country's currency may be strong relative to the dollar.
C)   two of the answers are correct.
D)   none of the other answers are correctE) All of the above
F) A) and B)

Question 16

Which of the following is not a method of speeding up collections?

Accepted Answer

A)   lock-box system
B)   regional collection centres
C)   extended disbursement float
D)   All of the answers are methods for speeding up collections.E) A) and C)
F) B) and D)

Question 17

Because they generally run a surplus budget, Crown corporations are able to issue securities with slightly lower yields than direct Treasury issues.

Accepted Answer

A) True 
 B)False  False

Question 18

Sales, receivables, and inventory form the basis of cash flow.

Accepted Answer

A) True 
 B)False

Question 19

"Extended disbursement float" has to do with the length of time a corporation takes to collect bills.

Accepted Answer

A) True 
 B)False

Question 20

LIBOR is

Accepted Answer

A)   a resource used in production.
B)   an interest rate paid on Eurodollar deposits between banks in the London market.
C)   an interest rate paid by European firms when they borrow Eurodollar deposits from Canadian banks.
D)   the interest rate paid by the British government on its long-term bonds.E) A) and B)
F) A) and C)

Exam 7: Current Asset Management

A Just-In-Time (JIT) inventory management program has all but which of the following requirements?

Correct Answer
verified

Cash management becomes more important as the level of short-term interest rates rise.

Correct Answer
verified

SWIFT's implementation of the 'smart card' is expected to

Correct Answer
verified

Deposit receipts purchased in small denominations of $1,000 at the bank are readily marketable.

Correct Answer
verified

Cash balances are usually determined by the amount of cash flowing through the firm on a yearly basis.

Correct Answer
verified

Because of changing economic conditions, it is difficult for companies such as D&B to devise models predicting payment problems and probability of bankruptcy 12 months in the future.

Correct Answer
verified

In managing cash and marketable securities, what should be the manager's primary concern?

Correct Answer
verified

Treasury bills are unique in that they trade on a premium basis.

Correct Answer
verified

Inventories are usually the most liquid, but lowest-yielding, current asset of a firm.

Correct Answer
verified

Driveline Sprockets expects total sales of $20,000. The price per unit is $5. The firm estimates an ordering cost of $9.00 per order, with an inventory cost of $1.20 per unit. What is the optimum order size?

Correct Answer
verified
C

Minimizing cash balances can improve overall corporate profitability.

Correct Answer
verified

The 4 C's of credit include character, capital, capacity, and conditions.

Correct Answer
verified

For modern corporations, the more cash they have, the better off they are.

Correct Answer
verified

A multinational company may prefer to hold sizeable cash balances in one currency rather than another because

Correct Answer
verified

Which of the following is not a method of speeding up collections?

Correct Answer
verified

Because they generally run a surplus budget, Crown corporations are able to issue securities with slightly lower yields than direct Treasury issues.

Correct Answer
verified
False

Sales, receivables, and inventory form the basis of cash flow.

Correct Answer
verified

"Extended disbursement float" has to do with the length of time a corporation takes to collect bills.

Correct Answer
verified

LIBOR is

Correct Answer
verified

Exam 7: Current Asset Management

A Just-In-Time (JIT) inventory management program has all but which of the following requirements?

Correct AnswerverifiedShow Answer

Cash management becomes more important as the level of short-term interest rates rise.

Correct AnswerverifiedShow Answer

SWIFT's implementation of the 'smart card' is expected to

Correct AnswerverifiedShow Answer

Deposit receipts purchased in small denominations of $1,000 at the bank are readily marketable.

Correct AnswerverifiedShow Answer

Cash balances are usually determined by the amount of cash flowing through the firm on a yearly basis.

Correct AnswerverifiedShow Answer

Because of changing economic conditions, it is difficult for companies such as D&B to devise models predicting payment problems and probability of bankruptcy 12 months in the future.

Correct AnswerverifiedShow Answer

In managing cash and marketable securities, what should be the manager's primary concern?

Correct AnswerverifiedShow Answer

Treasury bills are unique in that they trade on a premium basis.

Correct AnswerverifiedShow Answer

Inventories are usually the most liquid, but lowest-yielding, current asset of a firm.

Correct AnswerverifiedShow Answer

Driveline Sprockets expects total sales of $20,000. The price per unit is $5. The firm estimates an ordering cost of $9.00 per order, with an inventory cost of $1.20 per unit. What is the optimum order size?

Correct AnswerverifiedC

Minimizing cash balances can improve overall corporate profitability.

Correct AnswerverifiedShow Answer

The 4 C's of credit include character, capital, capacity, and conditions.

Correct AnswerverifiedShow Answer

For modern corporations, the more cash they have, the better off they are.

Correct AnswerverifiedShow Answer

A multinational company may prefer to hold sizeable cash balances in one currency rather than another because

Correct AnswerverifiedShow Answer

Which of the following is not a method of speeding up collections?

Correct AnswerverifiedShow Answer

Because they generally run a surplus budget, Crown corporations are able to issue securities with slightly lower yields than direct Treasury issues.

Correct AnswerverifiedFalse

Sales, receivables, and inventory form the basis of cash flow.

Correct AnswerverifiedShow Answer

"Extended disbursement float" has to do with the length of time a corporation takes to collect bills.

Correct AnswerverifiedShow Answer

LIBOR is

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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C

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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False

Correct Answer
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Correct Answer
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Correct Answer
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